Investors looking for hidden gems should keep an eye on small-cap stocks because they’re frequently overlooked by Wall Street. Many opportunities exist in this part of the market, but it is also a high-risk, high-reward environment due to the lack of reliable analyst price targets.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. Keeping that in mind, here are three small-cap stocks to pass on and some alternatives you should look into instead.
Nature's Sunshine (NATR)
Market Cap: $249 million
Started on a kitchen table in Utah, Nature’s Sunshine (NASDAQ: NATR) manufactures and sells nutritional and personal care products.
Why Does NATR Give Us Pause?
- Lackluster 4.4% annual revenue growth over the last three years indicates the company is losing ground to competitors
- Revenue base of $492 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Estimated sales growth of 2.8% for the next 12 months implies demand will slow from its three-year trend
Nature's Sunshine’s stock price of $14.17 implies a valuation ratio of 13.2x forward P/E. Check out our free in-depth research report to learn more about why NATR doesn’t pass our bar.
Laureate Education (LAUR)
Market Cap: $5.17 billion
Founded in 1998 by Douglas L. Becker and based in Miami, Laureate Education (NASDAQ: LAUR) is a global network of higher education institutions.
Why Should You Sell LAUR?
- Number of enrolled students has disappointed over the past two years, indicating weak demand for its offerings
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 1.7 percentage points
- Underwhelming 18.6% return on capital reflects management’s difficulties in finding profitable growth opportunities
Laureate Education is trading at $37.53 per share, or 17.4x forward P/E. If you’re considering LAUR for your portfolio, see our FREE research report to learn more.
AerSale (ASLE)
Market Cap: $262 million
Providing a one-stop shop that integrates multiple services and product offerings, AerSale (NASDAQ: ASLE) delivers full-service support to mid-life commercial aircraft.
Why Do We Steer Clear of ASLE?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 7.5% annually over the last two years
- Free cash flow margin dropped by 35 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
At $5.49 per share, AerSale trades at 20.5x forward P/E. To fully understand why you should be careful with ASLE, check out our full research report (it’s free).
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
